Call for state budget cuts includes plenty of exemptions

2of4Texas Governor Greg Abbott speaks at a press conference at the Brazoria County Court at Law after taking an aerial tour of Brazoria and Fort Bend Counties Friday, June 3, 2016, in Angleton. ( James Nielsen / Houston Chronicle )Photo: James Nielsen, Staff

3of4Lt. Governor Dan Patrick speaks during a news conference Tuesday, May 31, 2016, in Austin, Texas. The fight over bathroom rights for transgender students escalated in Texas on Tuesday as Patrick urged schools to defy the Obama administration while parents of transgender children accused Republican leaders of stoking intolerance and making their kids targets for bullying. (Laura Skelding/Austin American-Statesman via AP) AUSTIN CHRONICLE OUT, COMMUNITY IMPACT OUT, INTERNET AND TV MUST CREDIT PHOTOGRAPHER AND STATESMAN.COM, MAGS OUT; MANDATORY CREDITPhoto: Laura Skelding, MBO

AUSTIN – In what has become a biennial rite of summer, Texas' top three officials on Friday directed state agencies to plan on spending 4 percent less in the next two years, even though legislative leaders already are predicting the next budget will be at least that much larger than the current one.

The directive from Gov. Greg Abbott, Lt. Gov. Dan Patrick and House Speaker Joe Straus comes as the state is expected to start next year's budget process with $10 billion less to spend because of lagging oil and gas revenues.

Between that and the ongoing pressure from many Republican leaders to reduce taxes again, the tension between cutting and growing spending already has lawmakers and interest groups in Austin calculating their next moves, even as some of the state's biggest costs – including border security, child protective services, health care and mandatory school funding – are exempt from cuts under Friday's directive.

"It's a positive sign that state leaders recognize the need for more smart investments in (Child Protective Services), education and mental health. But if we want Texas kids to be healthy and on track to succeed, the state should not reduce funding for the health, early childhood development, and other effective interventions critical to children's success," said Stephanie Rubin, CEO of Texans Care for Children. "We hope the governor and legislators make investments in our children and families the priority next session."

While the target cut for agencies' proposed budgets is 4 percent, Texas' leadership trio made it clear they want spending plans to be scrubbed.

"Limited government, pro-growth economic policies and sound financial planning are the key budget principles responsible for Texas' economic success," states the Friday letter from Abbott, Patrick and Straus. "It is imperative that every state agency engage in a thorough review of each program and budget strategy and determine the value of each dollar spent."

In 2015, the Legislature approved $209.1 billion in the current two-year state budget, 4.3 percent above the previous spending plan. And while that budget was heralded as conservative by Republican leaders and fiscal-conservative groups, the appropriations of state funds grew 7.1 percent, faster than population growth plus inflation – a metric frequently cited by conservative groups already arguing for smaller budget growth in 2017.

"Low tax, low spend states perform better than high-tax, high-spend states. To cut the tax burden on Texans from previous spending excesses, the Texas Legislature should build on the momentum of last session by passing a historic second consecutive conservative budget," said Talmadge Heflin, a former chairman of the budget-writing House Appropriations Committee who now is director of the Center for Fiscal Policy at the Texas Public Policy Foundation, a leading conservative policy group in Austin. "Doing so will provide the state with, at most, a spending increase of $9.4 billion to cover basic public necessities while prioritizing spending and cutting the tax burden on Texas taxpayers so that they can reach their full potential."

Tough session ahead

Eva De Luna Castro, a longtime budget analyst with the Center for Public Policy Priorities, a policy organization that takes a more liberal stance on social services and spending than Heflin's group, said the directed cuts have become a way for state officials to dampen expectations going into a budget-writing year. It also "helps make room for other priorities that they may put at the top of their budget proposals," she said.

"They're doing it more because they are worried that the next session is going to be tough," Castro said. "They're going into the next session with almost $10 billion less in room to work with, so maybe they're giving themselves a little more breathing space to deal with."

While initial reaction from agencies to the budget-cut directive ranged from eye-rolling to complaints that tighter and tighter spending is only exacerbating a downward slide in some key state services, state officials and GOP policy analysts insisted that those who are complaining are missing the point: Every state dollar that is spent should be justified every two years.

"Agencies should always help us identify opportunities for savings. We need to move away from the idea that every budget starts at current levels and simply grows from there. We will look across the budget to determine which programs are serving their intended purpose and producing results," said Senate Finance Committee Chairman Jane Nelson, R-Flower Mound, whose committee helps write the budget.

Under the Friday directive, the stated purpose of which is partly "to restrain the size of government," many programs may escape that review.

Exempt are such items as statutory funding for the Foundation School Program, border security initiatives, debt service, pension and benefit requirements for state employees and funding for Child Protective Services.

Exempted programs

It also exempts funding needed to maintain current benefits and eligibility in Medicaid programs, the Children's Health Insurance Program, foster care, adoption subsidies and permanency care assistance – all will beadjusted to account for projected population growth.

Most legislative leaders predict school funding will be discussed, but, perhaps, only as a part of the continuing push to further cut property taxes. The Texas Supreme Court ruled earlier this year that the state's school finance scheme was flawed but constitutional, which may give lawmakers clearance to leave it alone.

Even if it is exempted from cuts, education funding should go under the microscope, said Wayne Pierce, executive director of the Equity Center, a Texas research group advocating for the elimination of inequities in education spending.

"We should look within the state's funding structure to see what things are in there that aren't necessary," Pierce said. "If you have an expenditure of public funds and you can't say this goes to effect that particular cost throughout the system, then you shouldn't be doing it."